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Christophe GOUEL (INRA) “Love of variety and gains from trade”

April 8, 2019, 12:15 pm

Time: 12:15pm – 13:30 pm
Date:08th of April 2019
Place: Room 3001

Christophe GOUEL (INRA) “Love of variety and gains from trade”

Abstract : To shed light on the way love of variety influences gains from trade, we propose a multi-country, multi-sector gravity trade model where taste for variety is parameterized separately from products substitutability, using a generalized CES demand function. We characterize analytically how gains from trade depend upon the love of variety and show that for the same love of variety a heterogeneous firm model can deliver the same gains from trade as a homogeneous firm model. We propose a setup to estimate structurally the love of variety elasticity and show that its value is significantly below the Dixit-Stiglitz framework’s one. This implies that models with firm-level heterogeneity based upon the standard CES framework significantly misrepresent variety effects, which result in a substantial overstatement of gains from trade.

Details

Date:
April 8, 2019
Time:
12:15 pm
Event Categories:
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Organizers

Edouard CHALLE
Julien PRAT